l White Paper
Using Channel Key Performance Indicators
to Grow Channel Sales
Introduction
Who are the most successful salespeople in any business-to-business channel
organization? They are the “challengers,” — people who challenge the status quo and bring
actionable new insights to their customers. This conclusion is based on exhaustive research
conducted by the Corporate Executive Board (CEB), an organization that helps senior
executives and their teams improve business performance.
The Sales Executive Council of CEB studied thousands of sales reps across a range of
industries and geographies. As a result, they created five major “profiles,” including: Hard
Workers, Relationship Builders, Challengers, Lone Wolves and Reactive Problem Solvers.
One might think that “Relationship Builders” would have the best sales success records. In
fact, they were the least successful. Instead, the “Challenger” group dominated in today’s
complex B2B selling environment. Challengers influenced the sales process in three ways:
• They brought new financial insights to the customer using an educational approach
• They tailored their insights to the customer’s immediate business problems
• They controlled all aspects of the sale from beginning to end
The details of challenger selling can be found in “The Challenger Sale” (Matthew Dixon and
Brent Adamson, CEB, 2011). However, our focus is to examine where the insights come
from that provide the fodder for “challenger” selling in the channel. One source for these
insights are Key Performance Indicators (KPIs).
What are Key Performance Indicators
(KPIs)?
progress toward a goal, or a change in percentage. In
any case, they must be quantifiable to be measured.
According to Bernard Marr, a leading business and data
expert, KPIs can be defined as “the most important
performance information that enables organizations
or their stakeholders to understand whether the
organization is on track or not.” KPIs are based on the
principle of “What gets measured gets managed.”
Source and frequency are two important components
of KPIs. Where does the information come from, and
how frequently can it be made available for analysis?
In this regard, Channel Data Management (CDM)
solutions play an important role. CDM applications
draw point-of-sale (POS), APOS, inventory and SISO
data directly from channel sources at multiple tiers
(distributors, resellers, etc.). And they do so in real
time, making the data instantly available for business
analysis.
KPIs don’t exist in a vacuum. They are built on
business or departmental goals, and they help
businesses stay on strategy and achieve desired
results. KPIs can take the form of raw numbers,
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KPIs are the vital signs of a healthy business
Channel Key Performance Indicators were defined
back in 2005 by two professional services firms, KPMG
and EY (Ernst & Young), so that managers would know
what was important to measure when growing the
channel. Channel KPIs are vital to keeping a channel
business or department on strategy.
KPIs vary not only by business, but also by function
within the business. Marketing and sales, finance,
operations—each department needs a different
set of channel Key Performance Indicators (KPIs) to
determine how it’s performing against established
goals. Moreover, managers in these disciplines
need an application of push notifications to alert
them when KPIs stray outside of pre-established
boundaries, and reports that pop up in their
workflow to let them know when the business is out
of sync with the business plan.
Literally hundreds of KPIs can be tracked for any
complex business. However, tracking everything defeats
the purpose of having KPIs, especially for the channel.
In the rest of this paper, we’ll examine some channel
KPIs common to businesses that depend on channel
sales for their survival and exponential growth.
Channel KPIs depend on accurate,
reliable and timely information
Businesses that operate with a multi-tier distribution
model need channel KPIs that measure channel
partner performance for each tier. This includes
Tier 2 organizations executing a pull through sales
strategy as well as Tier 1 distributors pushing
inventory daily to maximize sales. Using Alert
Notifications, KPIs can be used to provide the region
or division to proactively respond before the weekly
global sales meeting.
Traditionally, information about what was going on
downstream in the channel was hard to come by.
Distributors, resellers, and other channel partners
did not readily share data about sales and inventory
status unless something was in it for them, and now
there is. A recent survey sponsored by Channelinsight
and Baptie & Company found that 75% of reporting
partners want clean channel information too, just like
the manufacturer.
Manufacturers who set up internal applications to
gather this information are challenged to collect and
integrate the data they ask for. POS, APOS, Inventory
and SISO data is often self-reported by channel
partners, so its accuracy and reliability is questionable.
Inaccurate data, in turn, impacts the accuracy of
incentive payments. As a case in point, one customer
who recently signed on with Channelinsight discovered,
after their data had been cleansed, that 7% of the
transactions on which they were paying incentives were
duplicates, significantly distorting the program’s ROI.
Conflicting data must be reconciled through either
a manual or BPO (Business Process Outsourcing)
process. POS, APOS, Inventory and SISO data (Sales
In, Sales Out) data coming from different platforms
must also be standardized so it can be integrated
into a single, useable repository to allow for channel
master data management.
Once the data is cleansed to ensure its accuracy, and
standardized so that apples can be distinguished from
oranges, it then needs to be analyzed and compared
to whatever metrics have been established. Channel
KPIs monitor all of this at both the executive and
tactical business operations level. All this effort can
consume a great deal of a company’s internal human,
IT, and financial resources.
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of options to accomplish this task. (See illustration)
With the advent of cheaper data storage and easyto-use analytical tools provided by third-party
vendors, this herculean task is now manageable.
Manufacturers and vendors can stop worrying
about the mechanics of acquiring accurate, reliable
information from the channel. Instead, they can focus
on establishing meaningful channel KPIs.
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l White Paper
Gaining insight into the channel
KPIs for Channel Sales
Having accurate, reliable information is predicated
on good data collection processes. Channelinsight’s
eBook on Best Practices for Channel Data Collection
points out that businesses that implement a program
to obtain reliable channel data could avoid incentive
overpayments by 6%. Next in importance are
dashboards with the ability to proactively notify the
CFO, Channel Chief, CMO, or CEO how the channel
is performing compared to the company’s business
plan. This dashboard functionality is accomplished
through alerts, flash reports, and notifications that
automatically pop up in a manager’s workflow when
a KPI falls outside its set parameters. The manager
can then interpret and investigate the data to identify
the source of the problem.
For companies deriving a majority of their business
from the channel, gaining a handle on channel sales
is critical. Yet manufacturers and vendors often
struggle to know where their products are ultimately
sold, to whom, and at what price.
Good data collection practices, proactive dashboards,
managerial experience and sound thinking ability are
the elements that provide a solid footing on which to
establish, track and gain insight from channel KPIs.
As noted previously, this challenge can be met by
the use of a CDM (Channel Data Management) cloud
application that offers channel KPIs, dashboards,
alerts, flash reports, and workflow notifications
about the business and the market as a whole via a
back-end process that automatically collects, cleans,
standardizes and enhances POS, APOS, Inventory and
SISO data from multiple tiers of the channel.
First, it’s important to relate channel KPIs to the
company’s business plan and channel strategy,
ensuring that they are well defined, quantifiable, and
consistent from year to year. It’s also important to
set a threshold or benchmark for each channel KPI.
Smart Data
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ChannelOptimization
Optimization
Total Available Market
Price Erosion
Collabora7on with Customer Maintain Margins
Average Selling Price
Incentive ROI
Dashboards, KPIs, Flash Reports, Alerts, Applica7ons & Workﬂow 7:57 AM Cleansed, Enriched, Enhanced, Matched & Learned POS, APOS Inventory & SISO 7:55 AM 7:54 AM © 2015 Proprietary & Confidential
POS, APOS, Inventory & SISO, in numerous formats & order: EDI, CSV, Excel, etc., (7 X24X365), with 17 accoun7ng & ERP applica7ons, a global network of distributors & resellers geXng clean data sent back 1 I Continued
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For example, “Increased channel sales” is a poorly
defined channel KPI without a target. Instead, “Grow
channel sales among our top 20 distributors by
10% by year’s end” is a more precisely defined and
targeted KPI; another might be pulling 70% of sales
through to the tier 2 reseller and deploying the
appropriate inventory at the tier 2 level to deliver on
a 20% sales growth number.
Sales per Partner
Another important consideration is to understand
how KPIs relate to one another. For example, sales
growth is a desirable metric, but not at the expense
of eroding price margins. Knowing how one KPI
impacts another is required to gain a big picture view
of the business.
Bookings represent a commitment to buy, or a
sale not yet made. This metric can help with sales
forecasting. An increase or decrease in bookings by
partner, region, end-customer, or end-market in a
given time period can provide insight into potential
problems or opportunities.
Sales-related KPIs can be developed around any
number of criteria, including, for example, the
published recommendations by KPMG, EY, and NEDA
(National Electronics Distributors Association).
Average Sales Order Price
Following are a few examples of channel-specific
KPIs:
Sales Growth
Sales growth tells you whether revenue is increasing
or decreasing, and at what rate. This metric can be
applied to individual partners, geographic regions,
individual products or services, end-customers or
end-markets. Over time, trends will emerge that can
provide insight for strategic decision-making.
Global Coverage
Use this metric to gauge the ability of individual
partners to generate revenue for the company.
Trending data can help you separate the good
performers from the poor ones so you can take
appropriate action.
Sales Bookings
This metric measures the average value of each
purchase order processed by channel partners.
Purchase orders include product names, number
of units, and sales price. This information can
help quantify opportunities associated with endcustomers. Combining this KPI with others such as
units per transaction can offer insight into future
inventory requirements.
Top Active Opportunities
An active opportunity is a qualified lead. Measuring
the number of top active opportunities by partner
helps with sales forecasting. A growth or decline
in this metric also helps identify top performing
partners, or points to problems that should be
addressed.
Lead to Shipped Orders
How long does it take from the time a lead is
generated until the sale is consummated and the
order shipped? This metrics speaks to the efficiency
of the sales process and the ability of the partner’s
sales force to close deals.
Fulfillment by Units and Dollars Sold
© 2015 Proprietary & Confidential
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How efficient is the order fulfillment process?
Converting orders to cash impacts not only the
revenue side of the business, but also customer
satisfaction. This KPI measures how quickly,
accurately, and completely orders are processed.
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Cancelled Orders
tracking performance against established program
goals could provide the insight needed to adjust
program elements, or curtail or expand a program.
This metric may point to a fall-off in demand or
a problem with product quality, among other
possibilities.
Following are a couple of marketing-related KPIs that
can help channel marketers gain insight into their
strategies:
The sales KPIs noted above represent a mere
sampling of potential KPIs that could be used to
gauge partner and product performance in the
channel. Which KPIs you choose to track will depend
on your business model and company goals.
Return on Investment (ROI)
This KPI measures revenue generated by an incentive
program (or other marketing tactics) compared to
the cost of running the program. The ability to gather
POS data instantaneously using a CDM application
allows channel marketers to assess programs
midstream and make adjustments on the fly.
KPIs for Channel Marketing
Sales incentive programs are one of the key tactics
used in channel marketing. In a recent survey1,
manufacturers reported running an average of 21
channel incentive programs annually, spending on
average 11% of channel revenue. These programs
involved incentives such as back-end rebates,
revenue rebates, MDFs (Marketing Development
Funds), deal registrations and co-op funds.
Market Performance
However, manufacturers also reported having
a difficult time knowing what they were getting
from these programs. For example, only 38% of
manufacturers reported that they were able to
calculate ROI on their incentive spend.
Following is a list of criteria that manufacturers rated
as important when it comes to incentive programs:
• Testing and modeling before launch
• Immediate visibility into performance
• Ability to compare performance against goals
• Ability to identify under/over performing programs
• Speed of incentive payment
In the survey, however, only 34% of respondents
indicated satisfaction with their ability to meet
these criteria. Manufacturers were also troubled by
overpaying incentives (by an average of 6% according
to this survey), and channel partners were bothered
by late payments from manufacturers.
Having accurate, reliable, and timely POS information
allows manufacturers to establish KPIs that address
some of these issues and concerns. Tracking how
quickly incentive payments are made to channel
partners, for example, could provide insight into the
health of the relationship with key partners. And
1
Silicon Valley Research Group, 2012
Incremental Sales
© 2015 Proprietary & Confidential
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This metric measures the contribution that an
incentive program (or other marketing tactic)
makes toward increasing sales. It’s a measure of net
revenue increase above a benchmark, and it provides
insight into the effectiveness of the program being
measured.
KPIs for Channel Inventory
Keeping track of inventory and anticipating future
needs is important to keep the channel pipeline
running smoothly. A CDM application gives you
real-time reporting on the status of your inventory.
Following are some KPIs that can provide deeper
insight:
Order Tracking
This indicator tracks the current status of all orders
and classifies them based on criteria such as shipped,
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back-ordered or on-hold. It provides a snapshot view
of inventory in the channel at any given time.
Inventory Turnover
This KPI measures how many times a year your
channel partners are able to sell their entire
inventory. It’s an indicator of channel efficiency,
and also provides insight into partner performance,
product quality and product mix.
Back Order Rate
This KPI measures orders that cannot be filled at the
time of purchase. Customers who have to wait for
the products they ordered are likely to be dissatisfied
and may eventually go elsewhere. A high back order
rate points to a problem with inventory management.
Again, the examples noted above simply illustrate
a few of the many KPIs that could be established
related to channel inventory. The key point is that a
CDM application can track these metrics in real time,
using clean, standardized data. This makes inventory
management in the channel a whole lot easier and
more efficient.
KPIs for Channel Finance
In a recent post, Bernard Marr, a noted consultant
and author, described his top 25 “need to know” KPIs.
He prefaced his list by saying that these KPIs should
be relevant to most companies. However, each
company should develop and track its own industryspecific KPIs. He organized his top 25 list into four
categories. Following are the KPIs he listed for
measuring and understanding financial performance:
• Revenue growth rate (The rate at which a company’s
income is increasing)
• Net profit (Income minus expenses)
• Net profit margin (Percentage of revenue which is
net profit)
• Gross profit margin (Percentage of revenue which
is gross profit, or revenue generated for each dollar
of sales)
• Operating profit margin (Operating income divided
by revenue)
• Return on investment (ROI) (Revenue generated by
investing into an aspect of a company’s operations,
relative to the cost of that investment)
Obtaining accurate and reliable information from
channel partners in order to track these metrics
is the real challenge. CDM software is designed to
recognize revenue from channel partners as it occurs
so that KPIs such as these can be used to measure a
company’s performance in the channel.
KPI-Based Scorecards
KPIs are key metrics providing insight into various
aspects of channel business. Scorecards consolidate
these metrics by business function, and provide a
means to evaluate channel partner performance.
Why use scorecards? Because they can help you
identify the channel partners who are making the
greatest contribution to your business and who
deserve the greatest support.
Manufacturers and vendors need channel partners
who are aligned with their business model, and who
share their goals, objectives, and values. They also
want partners who focus on the vertical markets
and end-customers with greatest potential to drive
mutual growth. Finally, in today’s rapidly changing
business climate, manufacturers need partners who
are prepared to navigate change.
Scorecarding is a way to identify and evaluate these
types of partners. Scorecarding should begin with
introspection and self-knowledge. A company must
have a well-defined sense of direction before it sets out
to measure the performance of its channel partners.
Given clarity of purpose, the foundation of a good
scorecarding system is measurable data. This is
where KPIs come into play. Choosing KPIs for your
scorecard is a matter of relevancy. What elements of
channel partner performance are most relevant to
your business?
For example, growing revenue might be a top
priority. In which case, you’ll want to list KPIs that
relate to your partners’ revenue-generating ability.
These KPIs can be generated from POS data. They
might include:
• Total Sales Revenue (period-over-period)
• Win/Loss Opportunities and ROI
• Lead to Shipped Orders and ROI
• Average Price
• Order Rate
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If your priority is optimizing channel performance,
relevant KPIs could include:
• Total Addressable Market
• Margin Integrity
• Price Erosion
• Lead/Opportunity/Sales/Inventory/Ship Analysis
Or you might want to focus on your partners’ supply
chain efficiency with KPIs such as these:
• Sales/Inventory Analysis
• Days of Supply
• Projected On-hand Inventory
• Inventory Accuracy
• Order Fill Rate
• Inventory Turns
Whatever your goals, KPIs are the building blocks of
your scorecard.
Summary
Channel KPIs are a business solution that measure
progress toward success. Since each individual
business defines success in its own terms, channel
KPIs can vary considerably from company to
company. However, every organization can benefit
from the discipline of developing and tracking KPIs.
Businesses whose livelihood depends on channel
sales struggled in the past to acquire KPI tracking
data. But now CDM applications can collect, clean,
CORPORATE HEADQUARTERS
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standardize, and enhance channel data in real time.
This allows channel-dependent businesses to use
KPIs as effectively as direct sales operations. The
knowledge and insight gained from channel-specific
KPIs can then be used in a “challenger” selling
approach to grow business in the channel.
About Channelinsight
Channelinsight’s cloud-based Channel Data
Management application and enablement services
provides manufacturers with visibility into every
distributor, reseller, and end-customer in every
transaction, with real time channel information
to anticipate changing channel business needs &
requirements. Channelinsight collects “raw” POS and
inventory data from tens of thousands of channel
partners globally 7x24x365, processes over $120
billion in actionable channel information annually,
and delivers critical key performance indicators to
customers for: available markets, price erosion,
real-time channel sales visibility and operational cost
reduction. Customers benefiting from this solution
include HP, AMD, Corning Life Sciences, ams AG,
Fluke Networks, Microsoft and more. Channelinsight
is backed by Rho Ventures, Sequel Venture Partners
and Vedanta Capital, and is headquartered in
Denver, CO with offices in Palo Alto, CA, Maidenhead,
UK and Singapore. For more information on
Channelinsight’s products and services, please visit
www.channelinsight.com.
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